Wife and I are 37 years old and live in a HCOL area and will stay here (lawyer licensed in NY). Our combined income is approximately 400k a year and we have about 500k saved for retirement with another 150k in taxable and cash. I have approximately 14k left in student loans at 2.45 % left after paying them off aggressively the last few years. Also save approximately 10k in my sons 529. We have no other debt.

I’ve watched the RE market in NYC essentially double in terms of price in the past 7 years. No idea what the future holds but the market right now seems to be falling. I’m significantly more comfortable being liquid but we have a 16 month old boy and would like another and I “feel” as if we should buy a place. What’s pushing me there is the fear of having to move while my kids are in school as well as rising rents. I would significantly prefer to stay in NYC rather than the burbs, as the commute to most of LI, Weschester and/or NJ is terrible and likely to get worse. Add to that the exorbitant taxes and it doesn’t make sense for me.

I have two options. Head down and save aggressively and buy a small 2 bedroom in a nice neighborhood in Brooklyn. This would curtail my ability to pay off my loan, save in a SEP, etc.

Or I could continue to rent and save.

Does anyone in NYC have experience with this choice and can they share insight. Thanks so much

Prices appear to be falling due to the limited deduction on interest and real estate taxes and increasing interest rates. I don't think that prices will get away from you if you continue to rent and save. You need to save at least enough for a 20-25% downpayment with a minimum of one year in expenses. With your income, your should target the 1/3 rule to taxes, saving, and spending. The larger your deposit, the more competitive you become as interest rates rise. I, too, recommend the NYTimes rent versus buy calculator. If and when you buy, consider public schools all the way through high school. District 2 in the UES is one of the few with priority schools for high school. I would consider living there before kids apply to high school. I know many high earners who happily rent and watch their net worth climb as they save and invest.

Tough situation. I would recommend renting close to work, keeping your commute short so you can maximize your work productivity. You have saved $650k, but with 2 kids in a HCOL, feels like you still have a ways to go. Problem is, seems like rents keep going up, so to keep your monthly rent at a stable price, your quality of life goes down, unless you buy. I found myself in this situation recently, escalating rents, so I finally bought.

I'm in a different part of NYC and still renting. Our kids are 2 and 4 and we have been in our neighborhood for about 4 years.

I don't know if this is also true in your preferred neighborhood, but one thing that stands out to me is the disconnect between current sales prices and market rents.

For example, rowhouses that would rent for about $3,500/month are selling for about $1.1 million - requiring about $5,000/month for combined mortgage (20% down/30-years) and taxes. Coops that would rent for about $2,500 are selling for about $500K - requiring about $3,000/month for combined mortgage (20% down/30-years) and maintenance fees (the kind of coop that can be sublet after a year or two in residence, I know not all allow this).

There is lots of variation of course, but I have been watching the local market for a while, and see many examples where the monthly cost of ownership is significantly higher than the market rate rent for the same place. It discourages me from wanting to buy at current prices. I would feel much more comfortable buying a place if I felt like we could easily rent it for close to (ideally more than) our monthly expenses (if we had to temporarily relocate to care for a sick relative, or had the opportunity to go abroad for a year, or lost our income suddenly, etc). I wouldn't want to be forced to sell at a loss during a bad time in the housing market, I'd like the flexibility to use it as a rental if/when our circumstances changed.

I have seen somewhat of a slowdown in our neighborhood in that asking prices this year seem to be about the same as asking prices last year, and I have seen some listings where the asking price has dropped a few times. I'm hoping for prices to actually decline just in time for other factors to make us ready to buy (probably about 2 years off), but that may be wishful thinking...

I'm in a different part of NYC and still renting. Our kids are 2 and 4 and we have been in our neighborhood for about 4 years.

I don't know if this is also true in your preferred neighborhood, but one thing that stands out to me is the disconnect between current sales prices and market rents.

For example, rowhouses that would rent for about $3,500/month are selling for about $1.1 million - requiring about $5,000/month for combined mortgage (20% down/30-years) and taxes. Coops that would rent for about $2,500 are selling for about $500K - requiring about $3,000/month for combined mortgage (20% down/30-years) and maintenance fees (the kind of coop that can be sublet after a year or two in residence, I know not all allow this).

There is lots of variation of course, but I have been watching the local market for a while, and see many examples where the monthly cost of ownership is significantly higher than the market rate rent for the same place. It discourages me from wanting to buy at current prices. I would feel much more comfortable buying a place if I felt like we could easily rent it for close to (ideally more than) our monthly expenses (if we had to temporarily relocate to care for a sick relative, or had the opportunity to go abroad for a year, or lost our income suddenly, etc). I wouldn't want to be forced to sell at a loss during a bad time in the housing market, I'd like the flexibility to use it as a rental if/when our circumstances changed.

I have seen somewhat of a slowdown in our neighborhood in that asking prices this year seem to be about the same as asking prices last year, and I have seen some listings where the asking price has dropped a few times. I'm hoping for prices to actually decline just in time for other factors to make us ready to buy (probably about 2 years off), but that may be wishful thinking...

I agree with your observations. It seems that the glut of high end rentals has resulted in landlords offering concessions for the first time in years. Am guessing that the landlords cut prices as soon as they have to in order to fill their empty apartments, and these effective price cuts trickle down throughout the market. Meanwhile, individual owners hold on longer, hoping to receive an offer at their listed price.

Prices appear to be falling due to the limited deduction on interest and real estate taxes and increasing interest rates. I don't think that prices will get away from you if you continue to rent and save. You need to save at least enough for a 20-25% downpayment with a minimum of one year in expenses. With your income, your should target the 1/3 rule to taxes, saving, and spending. The larger your deposit, the more competitive you become as interest rates rise. I, too, recommend the NYTimes rent versus buy calculator. If and when you buy, consider public schools all the way through high school. District 2 in the UES is one of the few with priority schools for high school. I would consider living there before kids apply to high school. I know many high earners who happily rent and watch their net worth climb as they save and invest.

Agree here also. I would think seriously about where you plan to send your children to school. If you plan to use private schools, your apartment location will not matter as much, other than their daily commute and interactions with classmates on weekends, but if you plan to use the public schools, drill down on the options.

I would significantly prefer to stay in NYC rather than the burbs, as the commute to most of LI, Weschester and/or NJ is terrible and likely to get worse.

Just mentioning there is the Train commute along the Hudson about 45 min express into Grand central from Croton on Hudson.
Westchester area
Used to live In Montrose many years ago and made the commute.

Wife and I are 37 years old and live in a HCOL area and will stay here (lawyer licensed in NY). Our combined income is approximately 400k a year and we have about 500k saved for retirement with another 150k in taxable and cash. I have approximately 14k left in student loans at 2.45 % left after paying them off aggressively the last few years. Also save approximately 10k in my sons 529. We have no other debt.

I’ve watched the RE market in NYC essentially double in terms of price in the past 7 years. No idea what the future holds but the market right now seems to be falling. I’m significantly more comfortable being liquid but we have a 16 month old boy and would like another and I “feel” as if we should buy a place. What’s pushing me there is the fear of having to move while my kids are in school as well as rising rents. I would significantly prefer to stay in NYC rather than the burbs, as the commute to most of LI, Weschester and/or NJ is terrible and likely to get worse. Add to that the exorbitant taxes and it doesn’t make sense for me.

I have two options. Head down and save aggressively and buy a small 2 bedroom in a nice neighborhood in Brooklyn. This would curtail my ability to pay off my loan, save in a SEP, etc.

Or I could continue to rent and save.

Does anyone in NYC have experience with this choice and can they share insight. Thanks so much

You've left out some important info. What % of your take-home currently goes to housing? How would this change if you bought? Keep in mind that in NYC (assuming you are not buying a single family house) you will incur the cost of fees (co-op, condo) which will be tacked on to your PITI. These can be significant.

On the flip side, owning gives you some measure of cost control year over year versus renting, plus an inflation hedge. Owning also give you an asset (not an investment, but an asset) that you can sell. Renting does not. Personally I can't imagine renting with children, but that's just MHO, I don't live in NYC (though I did, when I was childless).

If you can afford to buy and still put enough away for retirement to get an employer match (let's say 15% of income, ballpark) then I'm not sure I would worry about not saving enough.

Wife and I are 37 years old and live in a HCOL area and will stay here (lawyer licensed in NY). Our combined income is approximately 400k a year and we have about 500k saved for retirement with another 150k in taxable and cash. I have approximately 14k left in student loans at 2.45 % left after paying them off aggressively the last few years. Also save approximately 10k in my sons 529. We have no other debt.

I’ve watched the RE market in NYC essentially double in terms of price in the past 7 years. No idea what the future holds but the market right now seems to be falling. I’m significantly more comfortable being liquid but we have a 16 month old boy and would like another and I “feel” as if we should buy a place. What’s pushing me there is the fear of having to move while my kids are in school as well as rising rents. I would significantly prefer to stay in NYC rather than the burbs, as the commute to most of LI, Weschester and/or NJ is terrible and likely to get worse. Add to that the exorbitant taxes and it doesn’t make sense for me.

I have two options. Head down and save aggressively and buy a small 2 bedroom in a nice neighborhood in Brooklyn. This would curtail my ability to pay off my loan, save in a SEP, etc.

Or I could continue to rent and save.

Does anyone in NYC have experience with this choice and can they share insight. Thanks so much

We've had a similar set of circumstances and set of decisions to make. We decided to continue to rent. A few key considerations:

Ideal home - with a growing, young family, it is nearly impossible to say with conviction that anything under $2mm (~1,400 sq ft @ $1400/sq ft, at the low end for example) in the city could be considered an "ideal" home for a growing family, for too long. So why try and force it? We'll continue renting until we decide what's right, whether it's in the city or not.

School - The UES and Tribeca provide great public schools but there is no guarantee that your child will get a seat in either through the current lottery system. So, imagine if you bought, like our friend, in the UES only to find out your child got a seat in the Bronx which requires a one hour commute each way. Their school ended up being OK, but now they have to coordinate a 2 hour commute for their 5 year old.

Economics - There is the SALT deduction cap. Then there is are the closing costs, costs of upkeep. Keep in mind NYC condos provide far superior liquidity and transparency vs co-ops.

Peace of mind / balance sheet - In your situation, where you are actively looking to pay down some debt and get the snowball effect going on savings, why rush into a large debt and capital commitment? If your income is so stable and good, spend a few years building a solid balance sheet, then buy. If you're worried about appreciating prices, aka price FOMO, don't fall for that. Invest the savings and take your time vs rushing into it.

Flexibility via renting - Rent increases can be pre-negotiated. 3-5% is normal. With your income, even if you had to move after a few years, you'd easily be able to find something in the same school zone. There are increasing amount concessions being offered by owners to renters - you can actually take advantage of the reduced liquidity of co-ops (lower values) by renting while not being locked into the illiquidity since you don't own the co-op!

Buying when it feels right - As you continue renting, you'll realize what you really want and don't want. To your point, brokers in the city are advising clients to bid up to 20% below asking prices - so, you may be able to rent and strike at the right time. If you're looking at Park Slope, that market is tighter right now and not as flexible.

Child care - Child care expenses for the 16 month old will increase if you decided to employ a nanny and/or send your child to a 2s/3s program. That may hamper your savings rate.

Don't get bullied by the FOMO - continue building a solid balance sheet if that's what feels right. In the meantime you can rent a $2mm property for around $6-8k/month. If you absolutely cannot bear the idea of moving, then buy - but it will be smaller than what you can afford to rent.

Last edited by nyclon on Mon Oct 29, 2018 11:49 am, edited 2 times in total.

I have friends in Manhatten who rent a 1 br with 3 kids. Something like $5k / mo but they love where they live

That's a good calculator in terms of the level of inputs they require from you. However, I don't think it takes into account the new tax law. I also wish they had an option to base property taxes on purchase price, not appreciated value. That feature would be useful for CA where Prop 13 limits your property tax assessment based on initial purchase price and inflation (not house appreciation).

I have friends in Manhattan who rent a 1 br with 3 kids. Something like $5k / mo but they love where they live

That's a good calculator in terms of the level of inputs they require from you. However, I don't think it takes into account the new tax law. I also wish they had an option to base property taxes on purchase price, not appreciated value. That feature would be useful for CA where Prop 13 limits your property tax assessment based on initial purchase price and inflation (not house appreciation).

Yeah, it's not perfect. And you need to estimate some things like future investment return and home / rental price increases, but still pretty good to get a feel for a break even point.

Personally I can't imagine renting with children, but that's just MHO, I don't live in NYC (though I did, when I was childless).

Why's that? I've owned for a while, but seems like renting would be easier which could be better for busy, young families.

Stability of homelife/being grounded and price predictability. Both are more important for families than single people or married couples.

Many people rent the same apartment for decades in Manhattan. It really is not unstable. Tenants have fairly strong rights in Manhattan also.

In the OP's position, I would be more comfortable as a renter due to the high uncertainty surrounding school choice.

Few people in NYC live in rent controlled apartments; thus, for most, rents rise, at least with inflation, and usually much more than inflation. Fixed mortgages become more affordable over time (assuming salaries keep up with inflation) and a portion of the payment goes toward something you own. Rent is a sunk cost with no long-term financial wealth building mechanism, IMO. Of course, if one buys but has nothing left to invest, that person is in worse shape than the person who rents and invests because the rent is cheaper. At least on the general ledger.

NYC is an edge case where the cost of ownership is extremely high. That said, the OP has a high family income and should be able to save enough to purchase a home at some point. However, as I pointed out, there are other costs (fees) that make owning more expensive in NYC than in other places. The OP has not yet posted what their housing budget is, so we have no way of knowing the exact parameters informing the choice.

I've read that the luxury sector of Manhattan has fallen off considerably. Foreign buyers ki (i.e. Chinese) have stepped back. This is the 2-4 million and up area so I don't know if it affects you.

I am also thinking we could be only 2 years away from a recession which would allow prices to fall 10-15% at least. So I lean heavily towards waiting and watching.

Also, I hear from buyers in my building which is a condo (I rent here) that the maintenance increases each year are staggering and something they had not budgeted for. Be sure to check out the cash reserves of any building you are considering and what repairs are coming up. Maybe you real estate lawyer can request to see the condo board meeting notes if you are serious about buying.

Personally I can't imagine renting with children, but that's just MHO, I don't live in NYC (though I did, when I was childless).

Why's that? I've owned for a while, but seems like renting would be easier which could be better for busy, young families.

Stability of homelife/being grounded and price predictability. Both are more important for families than single people or married couples.

The counter could be that if renting is cheaper it's provides more stability through additional wealth, more liquidity, more flexibility, more time, less stress. Probably depends on a case by case basis.

I have two options. Head down and save aggressively and buy a small 2 bedroom in a nice neighborhood in Brooklyn. This would curtail my ability to pay off my loan, save in a SEP, etc.

Or I could continue to rent and save.

Does anyone in NYC have experience with this choice and can they share insight. Thanks so much

Many young couples, with profiles similar to yours, cycle through a 4 apartment bldg my family has owned in a highly desirable Landmark districted block in Brooklyn since 1962. One couple, however, has stayed in our bldg for the last 17 years, though I think they're the odd one since they also own a home in Europe and reside in Brooklyn 6 months of the year. The other couples get growing pains with pregnanices and children, move out of our small apartment spaces (800 to 750 sqf) to bigger spaces as owners or tenants, but generally stay in the neighborhood because the schools, both public and private, are excellent. House prices in my neighborhood are very pricey, but if you look hard enough, one could find a good fixer-upper, with enormous potential upside.

There is so much rental inventory on the market right now so rents are priced very low and corporate landords are offering lots of incentives to tenants (we know this well personally as my daughter rents in Williamsburg and many bldgs are offering major incentives due to high inventiory and the up-coming L train shutdown).

I'd keep renting if I were you preferably in a neighborhood you're willing to eventually purchase and own in a few years from now, when rents start an upward tick and you've found an affordable place to plant more stable roots. I'd look for a 3-4 apartment bldg, with excellent housing bones, where you could live in one unit and rent out the other ones for a while and then look later to turn the bldg into a single family house -- many enterprising young couples do this and I've seen this play replicated so many times in Brooklyn. Before this site turned into a giant informercial, it used to be a site where young couples would report their efforts in restoring brownstone houses and living in good neighborhoods in Brooklyn. https://www.brownstoner.com/

It may differ depending on exactly where the OP is looking (so I still suggest the rent vs buy calculator) but that is pretty strong case for renting.

That article doesn't make sense to me...it is based on the sales price of a unit that would rent for $1,000. I don't know of any $1,000 market-rate apartments in Manhattan. Also sales price (they say $608,160 in Manhattan is equivalent of $1,000/month rent) without factoring in condo/coop maintenance fees doesn't seem meaningful for NYC. A $608,160 apartment in Manhattan could have maintenance fees above $1,000/month. But yes, if you could rent one for $1,000, that would be the better deal!

It may differ depending on exactly where the OP is looking (so I still suggest the rent vs buy calculator) but that is pretty strong case for renting.

That article doesn't make sense to me...it is based on the sales price of a unit that would rent for $1,000. I don't know of any $1,000 market-rate apartments in Manhattan. Also sales price (they say $608,160 in Manhattan is equivalent of $1,000/month rent) without factoring in condo/coop maintenance fees doesn't seem meaningful for NYC. A $608,160 apartment in Manhattan could have maintenance fees above $1,000/month. But yes, if you could rent one for $1,000, that would be the better deal!

I think the price vs rent ratio is based on averages. It's just a quick way to gauge and compare what cities it's better to rent than buy.

But crunching the actual numbers is better for a single city home by home comparison.

The article uses a example rent of $1,000 for all cities, but they are quite a bit more in many of the cities.

one thing that stands out to me is the disconnect between current sales prices and market rents.

This.

We are in a different city (less expensive than NYC, but still fairly major and expensive compared to most) and in some ways in not too different situation from OP. We seriously considered buying our proverbial "forever" home in a leafy suburb. Getting something amazing that we would have been happy with for years to come would have been doable budget-wise, but a bit more of a stretch than we would have liked. After running the numbers renting was the biggest no brainer of all time - I'm almost embarrassed to say that we even spent the time shopping to buy. We found a very nice house to rent in a nice area for way less than it would have cost to buy. To buy a house like what we are renting (assuming a 20% downpayment, 30 year mtg) would have been a few hundred more per month in mortgage over rent + $14k taxes/yr + higher insurance costs + potentially on hook for larger maintenance items. So I think conservatively we are saving close to $20k per year... Even if you counted the principal payment as savings then you are not even close to break-even. And then when you factor in that wife is okay renting less house than what she'd be excited to commit to buying then you really come out way ahead.

We do intend to buy eventually, but I could not be in less of a rush after really looking at the numbers. It is definitely a consumption purchase and life-style choice and not necessarily the best financial move.

Do you have Kids ??. if you do and are renting a similar house not an apartment, then you aren't sacrificing anything..

I'm in the same situation.. The numbers wont work at all.. Im looking at a 20K plus increase per year by owning.. I really like the way I don't have to do anything around the house and all is taken care of..Ofcourse I want to buy some day. So I'm looking for a low tax house... This tax is going to kill us in long term if we don't choose well now.

Only concern I have now is if I have to move because the landlord wants to sell or something.. Also if the house prices keep going North...

I'm in a different part of NYC and still renting. Our kids are 2 and 4 and we have been in our neighborhood for about 4 years.

I don't know if this is also true in your preferred neighborhood, but one thing that stands out to me is the disconnect between current sales prices and market rents.

For example, rowhouses that would rent for about $3,500/month are selling for about $1.1 million - requiring about $5,000/month for combined mortgage (20% down/30-years) and taxes. Coops that would rent for about $2,500 are selling for about $500K - requiring about $3,000/month for combined mortgage (20% down/30-years) and maintenance fees (the kind of coop that can be sublet after a year or two in residence, I know not all allow this).

There is lots of variation of course, but I have been watching the local market for a while, and see many examples where the monthly cost of ownership is significantly higher than the market rate rent for the same place. It discourages me from wanting to buy at current prices. I would feel much more comfortable buying a place if I felt like we could easily rent it for close to (ideally more than) our monthly expenses (if we had to temporarily relocate to care for a sick relative, or had the opportunity to go abroad for a year, or lost our income suddenly, etc). I wouldn't want to be forced to sell at a loss during a bad time in the housing market, I'd like the flexibility to use it as a rental if/when our circumstances changed.

I have seen somewhat of a slowdown in our neighborhood in that asking prices this year seem to be about the same as asking prices last year, and I have seen some listings where the asking price has dropped a few times. I'm hoping for prices to actually decline just in time for other factors to make us ready to buy (probably about 2 years off), but that may be wishful thinking...

I agree with your observations. It seems that the glut of high end rentals has resulted in landlords offering concessions for the first time in years. Am guessing that the landlords cut prices as soon as they have to in order to fill their empty apartments, and these effective price cuts trickle down throughout the market. Meanwhile, individual owners hold on longer, hoping to receive an offer at their listed price.

A few things to keep in mind when trying to understand why landlords are “losing money” (which they aren’t):
1. If they borrowed to buy the building, their interest expense is much lower than the inputs going into the rent/buy calculator.

2. Most landlords buy with cash

3. There are tax benefits that likely outweigh the $1000/month difference in mortgage vs rental rates.

I'd just keep renting, pay off the loans and stock pile money. With your income, you can put cash together very quickly. In the meantime real state should weaken a touch... that combined with a strong cash position, you will get a great deal.